What is the Impact of the 2025 Budget on MSME

The 2025 Union Budget has unveiled several policy interventions that are meant to bolster Micro, Small and Medium Enterprises (MSMEs) within the country. They are the heart of the Indian economy with substantial contributions to GDP as well as employment creation. The new budget recognises their importance and provides a fresh impetus to help them recover and thrive, especially in the post-pandemic world.

Ranging from easier financing options to the adoption of technology, these moves aim at empowering small businesses. What do these budgetary changes mean for MSMEs, and are there any implications for their future?

Boosting financial support for MSMEs

Access to affordable credit remains a key concern for MSMEs. The union budget for MSME 2025 addresses this by focusing on streamlined financial assistance –

• Revised credit guarantee scheme – The budget has allocated INR 9,000 crore to the revamped Credit Guarantee Scheme. This initiative aims to make MSME loans more accessible by reducing costs for borrowers. Institutions offering guarantees under this scheme will now provide enhanced cover, making it easier for enterprises to secure loans without collateral.

• Support for stressed MSMEs – Mechanisms have been put in place to ensure that businesses that are struggling can continue to access credit. This encompasses government-backed funds providing guarantees with the aim of averting their conversion into non-performing assets (NPAs).

• Lower MSME loan interest rates – The government aims to reduce borrowing costs by partnering with financial institutions to offer favourable rates for MSME business loans. This is expected to encourage more small companies to scale operations without the fear of exorbitant repayment terms.

Also Read: Union Budget 2024 Highlights: How Does it Affect MSMEs?

Incentives for technological adoption

Technology is critical for the growth of MSMEs. The budget for MSME 2025 India recognises this need and has rolled out initiatives to promote digitisation and innovation –

• Digital platforms for MSMEs – The budget has proposed establishing portals to provide guidance on funding, regulatory compliance, and export strategies. These platforms will also connect MSMEs with global buyers.

• Technology upgradation support – Incentives under existing schemes such as the ‘Raising and Accelerating MSME Performance’ (RAMP) programme have been enhanced. This will enable businesses to modernise their operations and stay competitive in domestic and international markets.

Empowering small companies to grow

• Small companies have received special attention in this budget, with policies tailored to their unique challenges. Some highlights include –

• Tax benefits for small companies – The turnover threshold for tax audits has been increased, allowing more MSMEs to benefit from compliance relaxations. Additionally, concessional tax rates on profits from exports aim to encourage global trade participation.

• Cluster development programmes – The government is allocating funds to enhance the infrastructure of MSME clusters. This will include improved access to utilities, logistics support, and shared resources to reduce operational costs for smaller businesses.

Key statistics to note

The Union Budget 2025 explained the importance of MSMEs with specific allocations and schemes –

• The 2025 Union Budget has proposed enhancing the credit guarantee cover for Micro and Small Enterprises from INR 5 crore to INR 10 crore, aiming to unlock additional credit of INR 1.5 lakh crore over the next 5 years.
• Increased MUDRA loan limits for entrepreneurs, allowing access to up to INR 20 lakh for business expansion, which is double what was allowed previously.

Also Read: Top Successful MSME Businesses in India (2025)

The Bottom Line

The union budget for MSME 2025 takes significant steps to uplift India’s MSMEs. By prioritising financial access, reducing borrowing costs, and promoting innovation, the government has laid a strong foundation for their growth. The initiatives address long-standing concerns while opening new avenues for expansion.

If you’re an entrepreneur or small business owner, this is the right time to leverage these opportunities. Explore your options for an MSME business loan or apply for a programme that fits your needs. Take the first step toward achieving your business goals with the government’s support.

Apply now for a small business loan and secure your path to growth in 2025!

Moreover, if you’re struggling to calculate your EMIs and want an accurate picture of EMIs, an EMI calculator can help you gauge this.

FAQs

Q.1. What is in the budget for MSMEs?

A. The credit guarantee cover for micro and small enterprises has increased from INR 5 crore to INR 10 crore, enabling additional credit of INR 1.5 lakh crore over five years. Startups will see their guarantee cover double from INR 10 crore to INR 20 crore, with a reduced fee of 1% for loans in 27 priority sectors.

Q.2. Which state is no. 1 in MSME in India?

A. As of December 2023, according to the MSME Dashboard's state-wise Udyam registration statistics, there are over three crore MSMEs registered in the country, according to government data. Maharashtra has the greatest number of MSMEs in India, followed by Tamil Nadu and Uttar Pradesh. Rajasthan, with 16 lakh MSMEs, and Gujarat, with 15.96 lakh MSMEs, are the other top destinations for registered units in the country.

Q.3. Which MSME is most profitable?

A. The most profitable MSME businesses vary by sector and location. However, the most profitable sectors for MSMEs are IT, healthcare, renewable energy, food processing, etc.

Q.4. Which are the top 3 states in MSME registration?

A. Maharashtra, Tamil Nadu, and Uttar Pradesh collectively contribute nearly 40% of all registered MSMEs in India. This information is according to a CBRE-CREDAI report.

Q.5. Who is not eligible for an MSME loan?

A. Large enterprises with turnover or investment exceeding the MSME thresholds cannot be classified as MSMEs. Thus, they can’t avail themselves of MSME loans either. Large enterprises typically have greater resources and operational capacities compared to MSMEs.

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